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Talk of indebtedness can be eye-glazing until it hits home, and then it can be scary. The other day I saw a chart in the New York Times that was like the trailer of a horror movie involving zombies--on government pensions.

First, as to overleveraging generally. The McKinsey Global Institute has a new study out that is generally upbeat on the ability of the U.S. to get out from under its collective debt load. The researchers were particularly rosy on private-household balance sheets--maybe too rosy if you consider the latest reports of credit-card debt increasing again.

MGI does note that public-sector debt cycles tend to last longer, but even there it shows the borrowing curve bending down in the latter half of a 10-year period, which would mean real soon in the U.S. But there's a problem: In the recent generation, we've amassed a giant obligation for pensions and other benefits for the public-sector workforce, which have been ill-accounted for. To get a glimpse of those zombies from the trailer, you look at Exhibit A4 in the appendix of the MGI study, which adds up the public debt in the country. Unlike the other categories, which are clean amounts, the portion labeled "State and local unfunded pension liabilities and health benefits for retirees" has a gaping range, anywhere from $1.2 trillion-$4.4 trillion, or 8%-29% of GDP.

A footnote explains that the wide range depends on the discount rate, assets market value and other accounting considerations. Much of that is shorthand for whether investments to fund the promised payouts perform as expected. Notoriously, public-pension plans have built high expected returns into their generous benefit plans. That is now better understood thanks to outfits such as the Empire Center for New York State Policy, an arm of the Manhattan Institute, near me.

"Understood," yes, but not resolved. That is where the scary chart in the New York Times comes in. Here it is, as it appeared in a story on government budgets being under strain in Silicon Valley:

(Click on graphic for wider view)

This is telling us that unlike in the recent recession, state and local employment grew in past downturns, and especially in the rough mid-1970s patch. (I suspect that was a demographics phenomenon related to teaching and policing children of the baby boom.) Which means that even though some operational costs have been cut lately, the public pension and benefit costs are unlikely to see relief. Those government career workers hired in the 1970s have now cruised into their full retirement mode.

I think I'm going to have nightmares!

UPDATE 1/16/13: Even the reforms urged by a goo-gov outfit like the Pew Charitable Trusts are too much for the reactionary defenders of lavish benefits. Here's yesterday's press release:

Washington, DC – The National Public Pension Coalition, a coalition of organizations representing millions of teachers, nurses, police, firefighters, and other public sector employees, issued the following statement in response to today’s Pew Charitable Trusts report on public pensions and retiree healthcare.

“To the detriment of all public employees and all of our communities, 'The Widening Gap Update' uses data from fiscal years 2009 and 2010, and will undoubtedly be used by organizations and individuals like the Koch Brothers and Arnold Foundation to advance their own agendas against public employees.

“No one is more interested in the long-term solvency of retirement systems than public employees, who are taxpayers themselves and who rely on their modest pension benefits after putting their own life savings into these plans.

“Unfortunately, rather than focus on retirement security and the important role that public pensions play in local economies, Pew suggest various reforms that would slash benefits and put retirement benefits at risk. It's simply unfair to repeatedly punish our teachers, nurses, police officers, and other public employees, many of whom do not receive Social Security.

"If states and cities continue to focus on slashing retirement benefits, public employees will be forced into poverty and forced to rely on additional state programs like Medicaid and government housing. These cuts, and the financial repercussions for retirees, have additional consequences for state budgets and for the taxpayers who would fund this increased reliance on government programs.

"The unprecedented number of pension-slashing policies in the states comes as politicians, who receive world-class benefits themselves, have teamed up with Wall Street to scapegoat America's working people in hopes of filling budget shortfalls and expanding income from fees and expenses.

"The bottom line is our politicians repeatedly broke promises by failing to contribute the required amounts to workers' pension plans, and then raided those funds for other purposes.

“While Pew acknowledges the factors behind the underfunded pension systems, to suggest modifications that punish public employees is irresponsible and uncalled for.